Credit and Development Forum (CDF), a network on microfinance, organised the programme chaired by Sir Abed of BRAC, world's largest development organisation

AMA Muhith, finance minister, Sir Fazle Hasan Abed, founder and chairperson of one of the largest microfinance institutions BRAC, and Qazi Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak Foundation (PKSF), shared this opinion at a national conference on microfinance on 30 may 2012.

Microfinance institutions (MFIs) should not be dependent on an individual to function properly. These should rather create strong institutional structures and succession plans to carry out activities without their founders or leaders. Institutional structures should be such that organisations will run well in future even without their founders or initiators, said Muhith at the inauguration of the event. Bangladesh Bank Governor Atiur Rahman also spoke. Muhith's remark came after PKSF Chairman Ahmad stressed the need for making succession plan of organisations, especially the MFIs. Abed echoed Muhith and Ahmad, saying that initiatives should be taken to ensure institutionalisation and improve governance of the MFIs. Institutionalisation will facilitate the MFIs to improve governance and help them come out of the limitations of depending on individuals, said Abed.

Muhith said there are cases that organisations could not function properly and carry out their activities after the departure of their initiators. "It is a curse. We should come out of this circle," he told the gathering of hundreds of microfinance practitioners from the grassroot level at Bangabandhu International Conference Centre. Muhith's remark came as hundreds of MFIs carry out lending activities for low-income people all over Bangladesh, dubbed as the birthplace of microloans in the world.

Over the past three to four decades, the volume of microloans soared and helped many people come out of poverty and empower women. It has also played a role in mobilising domestic savings. Muhith said microfinance is one of the strong tools to reduce poverty. "But sometimes we wrongly term it as the only tool," said the minister, who was also upbeat about the poor borrowers.

Currently, two crore families are the clients of microfinance and so far Tk 270,000 crore in loans has been disbursed to these families. At present, these households have Tk 40,000 crore in loans, said CDF Chairman Md Mosharraf Hossain."The poor are better borrowers than the rich. They repay loans. They are not like rich men who gobble up funds," he said, adding that default rate of microfinance is only 2-3 percent. But the percentage of default loans stands at 6-22 percent at conventional banks from where rich people borrow, he said.

"We are proud of the microfinance borrowers," said Muhith, adding that microloan receivers would get loans at 27 percent interest including charges, fixed by Microcredit Regulatory Authority, the regulator. The minister, however, suggested the MFIs should avoid overlapping and cross-funding. The regulator should take initiative in this regard, he said.Sir Abed said microfinance has expanded much. But more tasks remain to be done, he said, citing the need to expand micro insurance and pension schemes for the poor. Abed also wanted the regulator to create mechanism such as a Credit Information Bureau (CIB) of Bangladesh Bank so that the MFIs get credit info of borrowers and avoid lending to the defaulters. He also demanded the government give permission to set up microcredit banks.

"Time has come for it and there is a need for it. We expect that the government will consider the matter seriously. There are microcredit banks in other countries. It is not clear why such banks will not be set up in Bangladesh," said Abed. PKSF Chairman Ahmad also backed the idea of establishing microcredit banks.